Gobierno en los canales de distribución

Control and Governance in Distribution Channels

Understanding Control in Distribution

• Control or governance refers to how companies within a distribution channel coordinate with each other. Effective coordination is essential for the distribution channel to function properly.

• There are inherent conflicts between manufacturers, distributors, and consumers regarding profit distribution. Manufacturers aim for profitability while distributors seek their own financial gain, leading to potential disputes over cost allocations.

• A mechanism for coordination is necessary due to these conflicts. The goal is to maximize the overall value of the product (the "cake") while ensuring a fair division of profits among parties involved.

Types of Governance in Distribution Channels

• Two fundamental types of governance exist: conventional channels and vertical systems. Conventional channels operate independently, relying primarily on price as the coordination mechanism.

• In a conventional channel, transactions occur without knowledge of the parties involved; relationships are purely transactional based on price and quality rather than long-term partnerships.

Characteristics of Conventional Channels

• Transactions in conventional channels are characterized by a lack of commitment; today's sale does not guarantee future business unless conditions remain competitive. This leads to a "clean slate" approach where each transaction stands alone.

• These channels thrive in sectors where products are commodities—indistinguishable from one another—such as fishery products, where quality and price are paramount but individual seller identities do not matter.

Risks Associated with Conventional Channels

• The absence of shared investments or long-term relationships can lead to exploitation by more powerful distributors who may impose unfair conditions on producers.

• If producers must adapt their processes significantly due to distributor demands without any collaborative relationship, they risk being marginalized or driven out of business if those distributors choose not to buy from them anymore.

Understanding Conventional and Vertical Channels

The Limitations of Conventional Channels

• Conventional channels often operate on a purely transactional basis, leading to price competition where distributors may choose cheaper options over quality adaptations.

• Specific investments are required for efficiency in conventional channels; these investments lose value if relationships break down, making them less competitive.

• The prevalence of conventional channels is diminishing, particularly in sectors like fishing, where brand emergence disrupts traditional practices.

Transitioning from Conventional to Vertical Systems

• As brands emerge and contracts form (e.g., agreements with retailers like El Corte Inglés), the nature of the channel shifts from conventional to more structured systems.

• In vertical systems, relationships become personal and interdependent; parties adapt their production processes based on client demands for quality or logistics.

Characteristics of Vertical Systems

• Vertical systems involve interconnected activities among parties who share knowledge and resources, enhancing operational efficiency through real-time data exchange (e.g., inventory management).

• Relationships in vertical systems can evolve to include shared ownership or physical resources, indicating a deeper level of collaboration than seen in conventional channels.

Managed Channels: Informal Yet Structured Relationships

• A managed channel is characterized by informal yet significant relationships between parties that share knowledge and information while maintaining flexibility in contracts.

• Power dynamics play a crucial role in managed channels; one party may hold asymmetric power over another or both may have balanced influence, affecting coordination efforts.

Practical Examples and Implications

• An example discussed involves Guillet's products being featured prominently at Carrefour; this illustrates the necessity for brands to establish strong ties with retailers for product placement success.

Gillet's Commercial Strategy and Distribution Dynamics

Coordination Between Gillet and Carrefour

• Gillet has a commercial team that includes an account manager who maintains daily relations with Carrefour, focusing on maximizing profitability in the shaving section.

• They are actively planning promotional calendars, which include point-of-sale activities supported by pricing promotions.

• Coordination involves sending displays and possibly personnel to set them up at Carrefour, ensuring space is available for these promotional materials.

• Agreements can be made informally outside of the pre-planned promotional calendar, demonstrating flexibility in their collaboration.

• The negotiation template includes discussions on prices and functional discounts whenever there are modifications.

Power Dynamics in Distribution Channels

• The example of "pijo" potato chips illustrates how product availability varies by location; some stores may benefit from selling certain products while others may not.

• There exists an asymmetrical power relationship between Gillet and Carrefour, influencing distribution channel decisions for products like "pijo" chips.

• Choosing a managed channel often means accepting informal coordination where one party holds more power than the other, impacting strategic decisions.

• Coca-Cola exemplifies a strong brand that easily gains access to distributors due to its market power compared to brands like Huber that have less leverage.

Contractual Relationships in Distribution

• In contractual channels, power dynamics are acknowledged but formalized through contracts that govern daily operations between companies.

• Contracts become essential when significant investments are made by both parties in specific assets, providing security against exploitation of those investments.

• An example is Bang & Olufsen's requirement for high standards in store setup and investment before allowing distribution rights for their premium products.

• Exclusive distribution agreements highlight the importance of intensity and coverage decisions within contractual relationships.

Understanding Contractual Channels in Distribution

The Concept of Contractual Channels

• The discussion begins with the idea that various distribution methods, such as car dealerships, are fundamentally based on contracts signed by involved parties.

• An example is provided with Bang & Olufsen, where the manufacturer grants a franchise to a retailer, showcasing a typical distribution contract.

• Manufacturers seek to control their sales channels without heavy investments in retail spaces by using franchises to manage product distribution effectively.

Franchise Dynamics

• The speaker emphasizes that manufacturers not only sell products but also market their business models to potential franchisees who will implement these ideas.

• A call for partners is highlighted on Bang & Olufsen's website, indicating their search for retailers who share their passion and vision.

Different Types of Contracts

• Various types of contracts exist depending on the service offered; automotive dealerships are noted as contractual relationships even if they aren't traditionally labeled as franchises.

• Coca-Cola serves as another example where the manufacturer sponsors wholesalers instead of retailers, producing syrup at specific locations and distributing it through bottlers.

Logistics and Distribution Models

• The logistics behind Coca-Cola's operations are explained: transporting water is inefficient; thus, local bottlers handle production closer to consumption areas.

• This model allows Coca-Cola to maintain an effective supply chain while minimizing transportation costs associated with moving large volumes of water.

Exclusive Contracts and Market Control

• Coca-Cola’s strategy includes having exclusive contracts with bottlers for regional distribution, ensuring control over how products reach consumers.

• The concept of exclusivity in contracts is discussed further; terms like "exclusive distributors" indicate binding agreements between parties that govern market access and product availability.

Case Study: Caterpillar's Distribution Strategy

• Caterpillar’s relationship with Finanzauto exemplifies exclusivity in territorial agreements where one distributor has sole rights within a region (the Iberian Peninsula).

• Such arrangements illustrate the risks manufacturers take when granting exclusivity—Caterpillar must ensure its partner can effectively sell its machinery within designated territories.

Exclusivity and Corporate Channels in Business

Understanding Exclusivity in Distribution

• Caterpillar's strategy involves exclusivity, where they require Finanzuto to sell only their machines, emphasizing the importance of mutual commitment in contractual relationships.

• The concept of corporate channels is introduced, highlighting that these channels are owned by the company itself, as seen with Nespresso and Nestlé.

Investment and Risk Management

• Nestlé invests heavily in its own stores, taking on significant financial risks compared to franchising models where local entrepreneurs manage operations.

• Establishing a physical store requires extensive planning and investment, including site selection and hiring staff.

Control Over Operations

• Apple’s retail strategy showcases the importance of control over sales channels; their executive vice president for stores plays a crucial role due to substantial investments made in retail locations.

• Direct ownership allows companies like Nespresso to have full control over product placement and marketing strategies without needing approval from third-party retailers.

Flexibility in Distribution Strategies

• Nespresso has adapted its distribution model by incorporating contractual agreements with other retailers while maintaining its corporate channel presence.

• This flexibility allows Nespresso to expand its market reach through partnerships while still controlling brand representation.

Corporate vs. Contractual Channels: A Case Study

• Tesla is discussed as an example of a corporate channel; it maintains strict control over showrooms but may also explore contractual arrangements for additional reach.

• The discussion raises questions about the costs associated with maintaining control versus potential benefits, illustrating the complexities businesses face when deciding on their operational strategies.